Alibaba.com On Why US Is The ‘Testing Ground’ For Global B2B eCommerce

Trust in B2B eCommerce is critical for both buyer and suppliers, and as more businesses demand to conduct trade online, B2B eCommerce platforms like Alibaba.com are positioning themselves as facilitators of this buyer-supplier trust.

Alibaba.com, a business unit of eCommerce conglomerate Alibaba Group, is best known in its home market of China, where vendors gain access to an estimated 10 million business buyers, most of which are across borders.

Now, Alibaba.com is looking to expand its international reach. The company is opening up its platform to vendors in North America, which will become a testing ground for further global expansion. But as B2B trade expands across borders, risk heightens and more obstacles emerge that can jeopardize that buyer-supplier trust.

Kivanc Onan, head of B2B Payments, Financing and Protection for Alibaba.com, North America, recently spoke with Karen Webster about Alibaba’s strategy to mitigate those risks, with payments and financial technology as key components of the company’s strategy for international growth.

International Ambitions

Business buyers from all over the globe have been using the Alibaba.com platform to procure goods: Onan said most of its 10 million buyers come from outside of China, and about one-third are in the U.S.

The North American market is undoubtedly a strategic one for the firm, with Onan pointing to the importance of enabling U.S.-based buyers and also sellers to wield the platform and support Alibaba’s internationalization efforts.

As Alibaba’s highest-value market, the U.S. will serve as a “testing ground” for the rest of the world, the company told Webster. Historically, while non-China vendors could use Alibaba to sell goods, the platform’s interface was tailored to Chinese suppliers. As such, the company’s expansion into North America requires a tailored user experience for sellers, with a focus on interface and language, in order to address the biggest friction points in the B2B eCommerce arena.

“In the context of both cross-border and domestic, in the B2B space, there’s a lot of friction,” said Onan.

But language and user experience aren’t the only factors to consider when targeting a new geographic market. As Onan explained, payment habits vary across the globe.

“There is payments friction on multiple fronts,” he said, adding that this friction grows even more prominent when trade occurs across borders, and with small businesses.

Supplier Payment Security

Establishing trust between buyers and suppliers across borders will be key to Alibaba’s success in expanding into North America, and payments are a key part of that strategy, Onan said.

Alibaba.com has integrated the Pay Later capability from small business online lending platform Kabbage, a solution that provides financing for small business buyers while enabling small suppliers to get paid more quickly.

It’s part of the company’s effort to tackle one of the biggest problems that can erode trust between buyers and suppliers: late payments.

In a recent survey of 1,000 small businesses in the U.S., PYMNTS calculated a $3.1 trillion gap in outstanding receivables, which places immense financial pressure on small suppliers as they wait for payment from their buyers.

Onan highlighted that when trading partners in different geographic locations are unknown to each other, easing the risk of late payments is essential to fostering trust.

“Cash cycles can be extremely long for online businesses, more intensely than the rest of the traditional small business trading market,” he said, adding that Kabbage enables Alibaba.com to “minimize the cash burden” on suppliers while adding value-added services through other third parties like logistics providers to ease SMBs’ biggest challenges of selling online to a global buyer base.

Buyers’ Shifting Balance of Power

The conversation of late supplier payments often occurs in the context of small vendors selling to large corporate buyers. But as Onan pointed out, Alibaba.com is focusing on small business buyers as well as sellers. And when SMBs are on both sides of the B2B equation, vendors aren’t the only ones stuck in a power struggle.

“The mid-sized, very large businesses give trade terms – say, ‘I’ll pay you in 90 days,'” he said. “If you’re Walmart, you can do that, and if you’re selling to Walmart, you’re willing to accept that. But if you’re a small business buying from anywhere, it’s really hard to agree to that type of payment term. You’re often required to make a down payment, or make a payment before it gets shipped out.”

That financial burden on small business buyers can be significant, particularly if a company is required to pay upfront and then wait 30 or 45 days for goods to actually arrive.

While integrating Kabbage‘s Pay Later solution is certainly valuable to suppliers in need of accelerated cash flow, Onan said it’s actually the small business buyers that have the highest demand for affordable financing of their purchases.

And while this financing can foster trust by ensuring that suppliers are paid in a timely manner, Onan added that the ability for a third-party platform like Alibaba.com to mitigate risk for both buyers and suppliers – in terms of quality control, delivery assurance and dispute resolution – helps to foster trust between trading partners while also lowering the cost of financing via greater transparency for more robust underwriting.

Over Alibaba.com‘s two-decade history, Onan said that only in the last several years has the platform shifted its focus to becoming a leading B2B trading platform. As the company takes additional steps to expand across borders, reaching not only new business buyers but also global vendors, the ability to provide a tailored, familiar experience is key to success.

Looking ahead, Onan said, as the company continues to focus on global expansion, fostering trust through value-added payments and financial services will continue to be an important strategy for growth.